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Bail-out fears hit banking shares Bail-out fears hit banking shares
(40 minutes later)
Shares in major UK banks have fallen sharply amid fears that more financial institutions will need to be bailed out by the government. Shares in major UK banks have fallen sharply amid fears more financial institutions will need to be bailed out by the government.
Worst hit was Barclays, which fell 25% while Royal Bank of Scotland, in which the UK government has a near-60% stake, closed 13% lower.Worst hit was Barclays, which fell 25% while Royal Bank of Scotland, in which the UK government has a near-60% stake, closed 13% lower.
Elsewhere, US bank Citigroup suffered a big quarterly loss, while Anglo Irish Bank was nationalised by Dublin. Elsewhere US bank Citigroup suffered a big quarterly loss, while Anglo Irish Bank was nationalised by Dublin.
US giant Bank of America also received a $20bn (£13.4bn) bail-out package.US giant Bank of America also received a $20bn (£13.4bn) bail-out package.
Much of the fall in UK bank shares came in the last hour of trading in London, as worries grew in European markets that the latest US government rescue signalled that Washington's efforts were failing to stabilise the financial sector. It has become obvious that the banking sector needs more capital globally David Buik, BGC Partners Ban lifted
Dealers said there was no single reason for the sharp fall in share prices, but that short-selling had also hurt the sector after the expiration of a ban on the short-selling of financial shares. The Irish government said it was to nationalise the Anglo Irish Bank after its funding problems continued.
Much of the fall in UK bank shares came in the last hour of trading in London, as worries grew in European markets that the latest US government rescue signalled Washington's efforts to stabilise the financial sector were failing. We know of no justification for the fall in share price Barclays spokesman Bank of America bail-outCitigroup to split
The falls came on the day the ban on short-selling, which had been imposed by the Financial Services Authority last September, expired.
"The shorting ban has been lifted and I guess the short guys have been sharpening up their tools and looking to see who they'll have a pop at next," said Numis Securities analyst James Hamilton."The shorting ban has been lifted and I guess the short guys have been sharpening up their tools and looking to see who they'll have a pop at next," said Numis Securities analyst James Hamilton.
Jittery moodJittery mood
Barclays shares ended at 98 pence, their lowest level since 1993. Its shares have lost 45% of their value this week.Barclays shares ended at 98 pence, their lowest level since 1993. Its shares have lost 45% of their value this week.
"We know of no justification for the fall in share price. We are fully aware of our regulatory obligations and we have not said anything," said a Barclays spokesman.
Meanwhile Lloyds TSB saw its shares drop 30% this week as it geared up for the finalisation of its merger with HBOS on Monday. It has become obvious that the banking sector needs more capital globally David Buik, BGC Partners Robert Peston's blogIrish bank to be nationalised
Uncertainty about the format of a new UK government plan being worked on to boost bank lending added to a jittery mood.Uncertainty about the format of a new UK government plan being worked on to boost bank lending added to a jittery mood.
It is understood ministers are planning an urgent bank package, which could pave the way for more taxpayer money to be pumped into the sector to offset losses on soaring bad debts.
Possible options could include fresh capital injections into banks or more government guarantees on toxic assets.Possible options could include fresh capital injections into banks or more government guarantees on toxic assets.
A plan could come as early as next week, with state guarantees to get credit moving again high on the agenda.A plan could come as early as next week, with state guarantees to get credit moving again high on the agenda.
David Buik of BGC Partners said: "It has become obvious that the banking sector needs more capital globally."David Buik of BGC Partners said: "It has become obvious that the banking sector needs more capital globally."
Commenting on Barclays and HSBC, which have so far decided not to take government aid, he said in the end they may have little choice. Commenting on Barclays and HSBC, which have so far decided not to take government aid, he said in the end they may have little choice: "I suspect they will have difficulty raising further private capital in this climate if they need it."
"I suspect they will have difficulty raising further private capital in this climate if they need it." US bail-outs
Across the Atlantic, the bail-out of Bank of America was aimed at helping it absorb losses from the takeover this month of struggling rival Merrill Lynch.
The handout will also see the firm offered guarantees against losses on up to $118bn in troubled assets.
The US government will take a stake in the bank in return for the aid, which comes on top of the $25bn handed to the group in last October's series of bank bail-outs.
Citigroup had already received $45bn in government loans and benefited from a state pledge to guarantee about $300bn in mortgages and other assets.
Citi has announced it now plans to split into two companies. One business, Citicorp, will do traditional banking, and the other, Citi Holdings, will hold the company's riskier assets.